Bank of England's money pump is all that's keeping economy going

[CHIMO]

Imagine for a moment that you left Britain on a space mission to Mars in November 2006. Tony Blair was prime minister, the City was booming and consumers were gearing up for their customary Christmas spending splurge.

It's been four years now since you set foot on earth but you have kept in touch and know the economy has had a near-death experience in which the banks were within hours of shutting down cashpoints and the wider economy descended into the worst slump since Ramsay MacDonald was prime minister.

Frankly, though, this is hard to believe. The only visible differences on the high street are that Woolworths is no longer there and there are a few more branches of Santander where there were once Abbey and Bradford & Bingley. The big four banks – Barclays, HSBC, Lloyds and Royal Bank of Scotland – are still in business; the shops are stocked with Christmas goodies; there are no queues of unemployed snaking round the job centre. City firms are planning multibillion-pound bonuses for their staff. It all seems, in the words of the David Bowie song, a "god-awful small affair".

Internationally, things also look faintly familiar. The idea, much trumpeted during the crisis, that "the world will never be the same again", sits oddly with the fact that the world looks very much the same as it did four years ago. Oil prices are still high, China and the other emerging markets are booming, Germany is exporting like there's no tomorrow and the financial markets' appetite for high-yielding risky investments is strong. Far from being on the edge of the economic abyss, a large part of the world is not only growing rapidly but looks capable of sustaining those growth rates for some time to come.

http://www.guardian.co.uk/business/2010/nov/29/banks-money-pump-keeps-economy-going

[Mojorabbit]

1. I just can't see it

We are bumping up on finite resources and there is not a whole lot left to exploit.

[jtuck004]

2. Sure you can. Change your perspective. Put yourself in the chairs

of those who know beyond a shadow of a doubt that when deflation comes their holdings will be worth less, and because they have spent years in the pursuit of nothing but money. Not building, not long-term consequences, nothing but increasing their score, measured by the money under their personal ownership or control. There is no thought of other people, no care that what you are doing is really nothing more than terrorism to the lives of tens or perhaps hundreds of millions of people. The only thing that is right is getting more money, the only thing wrong would be either not getting more or losing value in what you have. Nothing but gathering in more money.

See it now?

[c14444c]

3. Wall Street Keynesianism

which has never been so clearly laid out as it was in yesterday's NY Times:

http://www.nytimes.com/2010/11/28/weekinreview/28segal.html?sq=caplin&st=cse&adxnnl=1&scp=1&adxnnlx=1291010405-jeMwiJELGgbj1SVjztZNog

Perhaps we are entering the era of the self-starter. Prof. Andrew Caplin of New York University thinks so. He begins with the premise that in the coming global economy some people will succeed and others will not, and income inequality will grow. While it’s noble to focus on how to spread wealth around, he says that it might be wiser to think of ways the poor and middle class could cater to the economy’s biggest winners.

“Unfortunately, there will be income inequality,” he says, “but enough people will make money that those who don’t would do well, in as much as they understand the needs of that group.”

He says he expects a rise in what he call “artisanal services,” like cooks, nutritionists, small-scale farmers. He sees services emerging that aid the wealthy at the intersection of health and genetic science. He imagines a rise in technology services, too — experts who keep clients current about technology which can advance their interests in business, in the media, on search engines and so on.

Professor Caplin worries that this concept might be caricatured as “cater to the rich.” But he suggested that this country could use a lot more non-judgmental thinking about the future of the United States economy. Any argument on that subject that starts with the word “should,” he said, is not nearly as useful as one that starts with “could” and has a firm grasp on “is.”


Otherwise known as "boot licking".

Laid out in economist Robert Brenner's work:

http://www.japanfocus.org/-R_Taggart-Murphy/3265

http://www.japanfocus.org/data/BrennerCrisis.pdf

http://www.nakedcapitalism.com/2009/12/in-the-eye-of-the-storm-updating-the-economics-of-global-turbulence.html

Some points to consider:

- This is an economic strategy - throw money at London (in the UK) and New York - and they will in turn spend money at Silicon Valley (e.g. Oracle) and the local "creative classes"
- This has been the economic strategy of every President since Clinton
- Fear of widespread job loss on Wall Street drove the bailouts
- New York, Boston, Philadelphia, Chicago and San Francisco are exceedingly dependent on money spent by the Financial Services sector
- Tea Party America associates these cities with the Democrats and believes Wall Street Keynesianism to be a Democratic strategy

[northernlights]

5. Professor Caplin worries that this concept might be caricatured as “cater to the rich.”

:rofl: :rofl: :rofl: :rofl: :rofl: Whodda thunk?

[bemildred]

4. The governments ought to all just buy each others bonds.

Cut out the middleman. It's a win-win.
(Maybe a little :sarcasm: )